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House committee approves spending cap plan

JUNEAU -- A Republican plan to cap state spending won approval in a House committee on Wednesday.

The resolution -- which has become a linchpin in the debate over whether to tax Alaskans to close the state's budget deficit -- would limit new state spending to 2 percent of the previous year.

The House Judiciary Committee overwhelmingly approved the measure on Wednesday.

Judiciary Chairman Norman Rokeberg, R-Anchorage, said the plan still requires some fine tuning when it goes to its next committee.

''(But) it doesn't distract from the importance of having a spending limit on the ballot,'' Rokeberg said.

Senate Joint Resolution 23 would require a simple majority vote of the Legislature to increase new state spending by 2 percent.

But lawmakers could increase spending by up to 4 percent of the previous limit with a 3/4 vote of both houses.

Lawmakers intend to put the resolution before voters in the November 2002 election. If it is approved, voters would also reconsider it in 2006.

The resolution would replace a provision in the state constitution that has proved ineffective in capping state spending, said Sen. Dave Donley, R-Anchorage.

Donley is co-chairman of the Senate Finance Committee, which is sponsoring the resolution. A version of the bill passed the Senate last year.

Republican leaders in the Legislature said a spending cap on state government will be a key element to any plan to cure the state's deficit problems.

Alaska is expected to have a $865 million shortfall in this year's budget that is expected to grow to $1.1 billion in fiscal 2003, the state Department of Revenue said.

Gov. Tony Knowles proposed raising $400 million through a state income tax and a mix of increased alcohol tax and a new $30 per-passenger tax on cruise ships.

But Senate Republican leaders have sharply criticized Knowles plan and said voters won't agree to new taxes without curbs on state spending.

Donley said his spending cap does not resolve the state's fiscal problem. But it gives voters an assurance that future taxes won't support a lot of new programs, he said.

It would generally hold the growth in state spending to between $66 million to $71 million annually. Higher increases would be possible with more legislative support.

But it also has provisions to allow for increased spending during emergencies and excludes Permanent Fund appropriations, debt paid on general obligation bonds and some other spending from the cap.

If the Legislature spends more than the cap would allow, the governor would be required to cut from his budget to reduce spending.

Rokeberg said he wants an amendment to exclude state programs that are fully funded by fees from the cap. The measure will now go to the House Finance Committee.

But House Judiciary Committee members generally embraced the plan and called it an important budget tool.

''Money to government is like blood to cancer. The more blood you give to cancer, the more it grows,'' said Rep. Scott Ogan, R-Palmer.

But state general fund spending has actually dropped in five of the last six years and Knowles administration officials said the cap is a superficial ploy to curry favor with voters without acting on revenue-raising measures.

''I can understand the Legislature's desire to boost their credibility in the eyes of the public,'' said Bob King, Knowles' press secretary. ''If they want to self-impose a restriction, they are free to do that.''

Brad Pierce, senior economist for the Office of Management and Budget, testified against the measure on Wednesday. He called it an unnecessary plan that could have unintended consequences later.

Sharp increases in Medicaid costs or a spike in University of Alaska admissions could force state cuts elsewhere to stay within the cap, Pierce said.

State budget leaders could also be forced to forego federal aid that requires matching funds and the cap would create an incentive to borrow money for capital projects, Pierce said.

Pierce said the cap also ignores the ''realities'' of the state budget by not considering future population and cost of living increases.

Pierce said voters elected the Legislature to decide how to control state spending. ''Do you feel like you need to be saved from yourself?'' he asked.

Rokeberg and Ogan both supported the resolution. Other committee members approving it included Reps Jeannette James, R-North Pole, John Coghill, R-North Pole, and Kevin Meyer, R-Anchorage.